Five ways US default would hit your pocketbook

ByScott Boyd, ContributorJuly 22, 2011

2.
Higher interest rates

US Federal Reserve Chairman Ben Bernanke testifies before the Senate Banking, Housing and Urban Affairs Committee on Capitol Hill in Washington July 21, 2011. A US default would almost certainly mean the nation would lose its triple-A credit rating and would have to pay higher interest rates to finance the federal deficit and debt.

Once branded a defaulter nation, the US would lose its coveted triple-A rating, and it would be forced to pay a considerable premium to borrow in the future. The federal government is already projected to spend $1.5 trillion more than it takes in this fiscal year, which means it will be forced to rely on deficit financing for the foreseeable future. The cost to secure and service this debt would surge.

Consumers would also feel the sting of higher interest rates as the increased cost of borrowing money would quickly find its way down to the retail level. The result would be a further drag on the economy.

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